Banking (Prudential Standards) adjustment or exclusion No. A9 of 2019 - 86400 Ltd

Overview

The Banking (Prudential Standards) adjustment or exclusion No. A9 of 2019 was enacted to address specific needs related to the prudential standards of capital adequacy as outlined in Prudential Standard APS 111 Capital Adequacy: Measurement of Capital. This legislation was introduced by the Australian Prudential Regulation Authority (APRA) to provide tailored adjustments to the prudential requirements for 86400 Ltd, with the aim of ensuring the financial stability of the institution while allowing flexibility in the measurement of its capital. This instrument was designed to come into force immediately upon signing and remains in effect until 17 July 2020, providing a temporary solution to meet the unique circumstances of 86400 Ltd. The policy objective behind this adjustment is to ensure that the institution adheres to the necessary capital adequacy standards while accommodating specific operational and funding arrangements.

Scope and Application

The Prudential Standard APS 111 Capital Adequacy: Measurement of Capital adjustment No. A9 of 2019 applies specifically to 86400 Ltd, identified by its Australian Business Number (ABN) 13 621 804 813. This adjustment is issued by Chris Gower, a delegate of the Australian Prudential Regulation Authority (APRA), under the authority granted by paragraph 43 of APS 111. This adjustment modifies the prudential requirements concerning capital adequacy as they relate to 86400, and the changes are detailed in the attached Schedule. The adjustment is effective from the date it is signed and will remain in force until 17 July 2020. It pertains to the conditions under which instruments can be purchased and funded, particularly focusing on restrictions related to the issuer, its group members, related entities, and the source of funding for these instruments. The adjustment allows for certain exceptions and conditions, such as the funding of instruments by deposits from 86400 to Cuscal Limited, subject to specified limits and conditions notified by APRA.

Key Provisions

The main operative sections of this legislation concern the adjustment of prudential requirements set out in Prudential Standard APS 111 Capital Adequacy: Measurement of Capital (section 1). Specifically, this adjustment is directed towards 86400 Ltd ABN 13 621 804 813 (86400), altering paragraph 1(k) of Attachment B to APS 111 (section 1(2)). The adjustment permits 86400 to issue instruments that may have been funded by its deposits with Cuscal Limited, subject to specific conditions and limits set by the Australian Prudential Regulation Authority (APRA) (section 1(3)). The Act imposes obligations on 86400 and Cuscal Limited to adhere to the conditions specified in the adjustment. This includes ensuring that any purchase of instruments by 86400 is either directly issued by the issuer or funded by deposits not exceeding the limits notified by APRA (section 1(3)(ii)). Additionally, Cuscal Limited must deduct any holdings of these instruments from its Common Equity Tier 1 Capital (section 1(3)(ii)(B)). These provisions require both entities to maintain compliance with the adjusted prudential standards and ensure that all transactions adhere to the specified parameters. Failure to comply with the conditions set out in the Act may result in breaches that could have serious legal consequences. Although the specific offences, penalties, or civil/criminal consequences are not detailed in this particular document, breaches of prudential standards generally can lead to regulatory action by APRA, which may include fines, enforcement actions, or more stringent regulatory oversight. The penalties for non-compliance can vary, but they are typically significant, reflecting the importance of maintaining adequate capital adequacy and sound banking practices. This adjustment is effective from the date it is signed and remains in force until 17 July 2020 (section 1). It is important for the involved parties to remain vigilant about the conditions and ensure ongoing compliance throughout the duration of the adjustment period. Any changes or updates to these provisions will need to be communicated by APRA, and it is imperative for 86400 and Cuscal Limited to stay informed and adapt to any new requirements that may be introduced.